X-Rite, Incorporated

More documents

Recommendations

Info

If shares acquired by a participant are sold after being held for the required holding period, the participant,upon disposition of the shares (or his or her estate upon the participant's death), will realize compensation taxable asordinary income, equal to the lesser of: (a) the amount by which the fair market value of the shares at the time ofdisposition or death exceeds the option exercise price (the purchase price for the stock); or (b) the amount by whichthe fair market value of the shares at the time the option was granted exceeded the option exercise price (thepurchase price for the stock). If the fair market value of the shares at the time of disposition exceeds the fair marketvalue of the shares at the time the option was granted, the difference between these amounts will be taxed as acapital gain. If the fair market value of the shares at the time of disposition or death is less than the option exerciseprice, no ordinary income is recognized and the difference between the option exercise price and the sale price istreated as a capital loss. No deduction is allowed to us as a result of the grant or exercise of or option to purchaseshares, except in the case of a disqualifying distribution described below.Disqualifying DispositionIf an employee disposes of shares purchased under the Plan before the expiration of the two-year holdingperiod, the disposition of the shares will be treated as a "disqualifying disposition", and the employee will not beentitled to the tax treatment described above. In the event of a disqualifying disposition, at the time the shares aredisposed of, the employee must include in his or her compensation the difference between the option exercise price(the purchase price for the stock) and the fair market value of the stock at the time of grant. The Company will thenbe entitled to a deduction for federal income tax purposes equal to the amount recognized as compensation by theemployee. The difference between the selling price, if applicable, and the option price (plus the amount recognized ascompensation) is treated as a capital gain or loss.Other InformationOn March 15, 2004, the closing price of the Company’s stock was $13.35 per share.Required Vote for ApprovalAt the Annual Meeting, the shareholders are being requested to consider and approve the Plan. Theaffirmative vote of the holders of the majority shares present or represented by proxy and entitled to vote at theAnnual Meeting is required to approve the Plan. Abstentions will be counted toward the total tabulation of the votescast on this proposal and will have the same effect as negative votes. Broker non-votes are counted towards aquorum, but are not counted for purposes of whether this proposal is approved.The Board of Directors recommends a vote FOR approval of the X-Rite, Incorporated Amended and RestatedEmployee Stock Purchase Plan.Governance of the CompanyThe Board has determined that a majority of the Directors are “independent” for purposes of compliance toThe Nasdaq Stock Market (“Nasdaq”) listing standards and Securities and Exchange Commission rules adopted toimplement provisions of the Sarbanes-Oxley Act of 2002, and that all of the members of the Audit Committee are also“independent” for purposes of Section 10A(m)(3) of the Securities Exchange Act of 1934 and Nasdaq listingstandards. The Board based these determinations primarily on a review of the responses of the Directors andexecutive officers to questions regarding employment and compensation history, affiliations and family and otherrelationships and on discussions with the Directors.The Board has adopted a charter for each of the three standing committees that address the make-up andfunctioning of the Board, along with a procedure for shareholder communications and the selection process for Boardcandidates. The Board has also adopted an Ethical Conduct Policy that applies to all of our employees, officers andDirectors; a Code of Ethics for Senior Executive Officers; and a Whistleblower’s Protection Policy. You can find linksto these materials on the Company’s website under Investor Relations at www.xrite.com.Board AttendanceEach member of the Board of Directors is expected to make a reasonable effort to attend all meetings of theBoard of Directors, all applicable committee meetings, and each Annual Meeting of Shareholders. While no formalpolicy with respect to attendance has been adopted, attendance at these meetings is encouraged and expected. Allmembers of the Board attended the 2003 Annual Meeting of Shareholders and each of the current members of theBoard is expected to attend the 2004 Annual Meeting of Shareholders. During fiscal 2003, the Board held sixmeetings and the committees held a total of 15 meetings. Each director attended at least 75 percent of the aggregatetotal of the number of meetings of the Board plus the total number of meetings of all applicable committees on whichsuch director served.8
Audit CommitteeThe Audit Committee focuses its efforts on the following three areas:• The adequacy of X-Rite, Incorporated’s internal controls and financial reporting process and the integrityof X-Rite, Incorporated’s financial statements;• The performance of X-Rite, Incorporated’s internal auditors and the qualifications, independence andperformance of X-Rite, Incorporated’s independent auditors; and• X-Rite, Incorporated’s compliance with legal and regulatory requirements.The committee meets periodically with management to consider the adequacy of X-Rite, Incorporated’sinternal controls and the financial reporting process. It also discusses these matters with X-Rite, Incorporated’sindependent auditors and with appropriate company financial personnel. The committee reviews our financialstatements quarterly and discusses them with management and the independent auditors before those financialstatements are filed with the Securities and Exchange Commission. During 2003, the Audit Committee held six (6)meetings.The committee regularly meets privately with the independent auditors, has the sole authority to retain anddismiss the independent auditors and periodically reviews their performance and independence from management.The independent auditors have unrestricted access and report directly to the committee.Audit Committee Financial Expert. The Board has determined that the Chairman of the committee, Mr. Sylvester, isan “audit committee financial expert,” as that term is defined in Item 401(h) of Regulation S-K, and “independent” forpurposes of current and recently-adopted Nasdaq listing standards and Section 10A(m)(3) of the Securities ExchangeAct of 1934. The Audit Committee operates under an Audit Committee Charter which was amended in 2003 and isattached as Exhibit B. The Charter is available on the Company’s website under Investor Relations at www.xrite.com.Report of the Audit CommitteeWe have reviewed X-Rite, Incorporated’s audited financial statements as of and for the fiscal year endedJanuary 3, 2004, and met with both management and Ernst & Young LLP, X-Rite, Incorporated’s independentauditors, to discuss those financial statements. Management has represented to us that the financial statements wereprepared in accordance with accounting principles generally accepted in the United States.Management has primary responsibility for the Company’s financial statements and the overall reportingprocess, including the Company’s system of internal controls. The independent auditors audit the annual financialstatements prepared by management, express an opinion as to whether those financial statements present fairly, inall material respects, the financial position, results of operations and cash flows of the company in conformity withaccounting principles generally accepted in the United States and discuss with us their independence and any othermatters they are required to discuss with us or that they believe should be raised with us. We oversee theseprocesses, although we must rely on the information provided to us and on the representations made by managementand the independent auditors.We have received from and discussed with Ernst & Young LLP the written disclosure and the letter requiredby Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees). These itemsrelate to that firm’s independence from the company. We also discussed with Ernst & Young LLP any matters requiredto be discussed by Statement on Auditing Standards No. 61, as amended (Communication with Audit Committees).Based on these reviews and discussions, we recommended to the Board that the Company’s auditedfinancial statements be included in X-Rite, Incorporated’s annual report on Form 10-K for the fiscal year endedJanuary 3, 2004.Paul R. Sylvester (Chair)John E. UtleyMark D. Weishaar9
Page 1 and 2: X-Rite, IncorporatedNOTICE OF ANNUA
Page 3: X-RITE, INCORPORATED3100 44 TH Stre
Page 6 and 7: Proposal to Amend and Restate Emplo
Page 10 and 11: Nominating and Governance Committee
Page 12 and 13: Compliance. During 2003, the Compan
Page 14 and 15: Securities Ownership of ManagementT
Page 16 and 17: Executive CompensationThe following
Page 18 and 19: The following table provides inform
Page 20 and 21: Certain Relationships and Related T
Page 22 and 23: shall be granted option rights unde
Page 24 and 25: Appendix BX-RITE, INCORPORATEDAUDIT
Page 26: 3. Review and approve all related p

X-Rite, Incorporated

Create successful ePaper yourself

Delete template?

Save as template?